Wall Street closes higher but pares gains with oil slide

(Reuters) - U.S. stocks closed higher on Thursday after a three-day decline but sharply pared gains late in the session as oil dropped to near seven-year lows and the strong dollar weighed on sentiment.

A trader works shortly after the opening bell on the floor of the New York Stock Exchange in the Manhattan borough of New York, December 8, 2015. REUTERS/Lucas Jackson

Major U.S. indexes have had a bruising week as a rout in oil prices made investors worry about economic growth.

Oil futures LCOc1 fell to fresh lows since 2009 as traders looked beyond a drop in U.S. crude stockpiles to focus on a global supply glut, while a stronger dollar weighed on commodities.

After settling down 1.1 percent, U.S. crude oil CLc1 fell further, pushing the S&P well off its session highs. Investors are worried about a spill-over effect from oil to the rest of the economy and see a strong dollar hurting corporate earnings, said J.J. Feldman, portfolio manager at Los Angeles-based Miracle Mile Advisors.

“People are still worried about the Fed and what’s going to happen next week. It’s been a tough week and rallies just don’t stick,” he said.

Investors are awaiting the Federal Reserve’s meeting on Dec. 15-16, when it is widely expected to raise interest rates for the first time in nearly a decade.

The Dow Jones industrial average .DJI rose 82.45 points, or 0.47 percent, to 17,574.75, the S&P 500 .SPX gained 4.61 points, or 0.23 percent, to 2,052.23 and the Nasdaq Composite .IXIC added 22.31 points, or 0.44 percent, to 5,045.17.

Despite sinking crude prices, the S&P's energy index .SPNY was the second-best gainer of the day up 0.62 percent. Some investors seem to be looking for energy stock bargains as they eye a bottom in oil prices, according to Feldman.

“The short sellers ran out of ammunition and probably took a breather,” said Uri Landesman, president of Platinum Partners in New York.

On Friday, investors will likely focus on November retail sales data, which includes the start of the crucial holiday shopping season.

Men's Wearhouse MW.N fell 16.97 percent to $15.27 a day after the retailer warned it may miss the lower end of its fourth-quarter forecast.

NYSE declining issues outnumbered advancing ones 1,546 to 1,496, for a 1.03-to-1 ratio on the downside; on the Nasdaq, 1,514 issues rose and 1,304 fell, a 1.16-to-1 ratio favoring advancers.

The S&P 500 posted 4 new 52-week highs and 15 new lows; the Nasdaq recorded 27 new highs and 98 new lows.

About 6.75 billion shares were traded on U.S. exchanges on Thursday below the 6.95 billion average for the last 20 sessions, according to Reuters data.

Additional reporting by Tanya Agrawal and Marcus E. Howard; Editing by Anil D’Silva and Nick Zieminski